Want to play defense in this market? Here’s your trade on Raytheon (RTN). (March 29, 2018)
RTN
Raytheon ( NYSE: RTN ). Here is the thing; in this market right now I don’t see a lot of squeezes, which are my favorite trades, a squeeze like this, tight sideways consolidation within an uptrend. By the way, you saw one here as well; a breakout to the upside. You see one here only this time there WAS no breakout to the upside, it was a breakdown, another squeeze and now we are off to the races and then we have the February March volatility.
Here on Raytheon ( NYSE: RTN ) and there are a couple other Aerospace & Defense stocks, it is kind of squeezing again. Ideally, the stock would keep going for a while and that is why I am mentioning this. They don’t report earnings for about a month but I want you to be watching FOR this price action. The stock is in a range between 220.00 and, say, 210.00. Now it is RIGHT in the middle so you have no advantage in buying or selling. Two days down, one day up. If you are buying right now at 215.00, wouldn’t you really be looking for a roof at 220.00, which gives you less than 2 percent?
You want to be looking at these types of things when you craft all of your trades. You have got almost 3 percent of downside risk, where the stock could pullback before testing support. You have got just 2 percent of upside reward so it is not a good time to be entering. But it is a good time to be WATCHING this stock. If you are really, really bullish on Raytheon ( NYSE: RTN ) and you want to take some stock now, fine. You put your stop, say, underneath 210.00, this is the risk you are taking; not much at all. How much would that be? So we buy it right around here, somewhere around there, so you are taking a 4 percent risk on this to have a pretty good stop here.
What I would suggest doing is this: Keep track of this stock; keep an eye on it, maybe set an alert at 210.00. If the stock falls back to 210.00 consider buying it because now you are buying it closer to support where you can hold the stock for a smaller distance before you get stopped out and it also has a little more room to run to the upside. So you build a small position by starting on a pullback, holding the position. And then IF the stock starts breaking out you can take a bigger position.
But ideally, you are going to wind up doing this sometime in April, not on Monday. Ideally, this thing is going to drift sideways for a while more and we will see the range tighten up here. We will see this tighten up and that gives us a sense that maybe when earnings are reported in a month the stock can explode to the upside on any good news.
That is how I would trade Raytheon ( NYSE: RTN ). Right now the trade is, watch it. That’s it. You just watch the stock. Wait for a pullback to 210.00 before buying. By the way, you can also watch 220.00. If the stock starts breaking out above 220.00 then that is your trade for the next leg higher. So there are three parts to this trade:
• Watch
• Buy at the bottom,
• Buy at the top.
Those are the three things that we are looking at here.